Valuation of Statoil ASA
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Executive Summary The oil and gas market has in recent years been exposed to greater instability and price fluctuates due to various events on the supply side. Climate concerns and the declining costs of alternative energy solutions has also raised uncertainty of the future demand for oil and gas. Statoil ASA is a Norwegian multinational energy company, and by revenue, among one of the world’s largest oil and gas companies. This implies that Statoil`s value will be dependent on future prices for oil and gas. Even though the company has announced that it will aim to become a broader energy company in the years to come. Considering this current business environment, the purpose of this thesis is to estimate Statoil`s equity value in order to compare it with the current market value. The problem statement of this thesis is defined as follows: What is the per-share equity value for Statoil ASA? To answer the problem statement, share price estimates was found by using the intrinsic, and relative valuation approach. The intrinsic approach was based on the discounted free cash flows of the firm and resulted in a share price estimate of 28.2 USD. However, further analysis indicates that this estimate is very sensitive to changes in the assumptions for future growth and the cost of capital. Alternative scenarios for oil and gas prices was also explored in order to observe for changes in the share price estimate. Key findings indicated, not surprisingly, that Statoil is indeed exposed to the future price levels of its main selling commodities. Although, this analysis also revealed an almost zero downside for Statoil`s current market value in a scenario where the world is able to fulfill the objectives of the Paris Agreement. Various multiples where used in the relative valuation approach. The results indicated wide spreads for the share price estimates. Although, the median value of 33 USD for all multiples suggests the same as the value found by the main case in the fundamental approach. The stock is currently being undervalued by the market.
Master's thesis in Applied finance